Graham
Corporation (GHM ), a global business that designs, manufactures
and sells critical equipment for the oil refining, petrochemical, power
and defense industries, today reported financial results for its second
quarter and first half year ended September 30, 2017. Grahams current
fiscal year ends March 31, 2018 ("fiscal 2018").

Net sales in the second quarter of fiscal 2018 were $17.2 million,
compared with net sales of $21.1 million in the second quarter of the
fiscal year ended March 31, 2017 ("fiscal 2017"). Net income and diluted
earnings per share in the fiscal 2018 second quarter were breakeven,
compared with $1.3 million, or $0.13 per diluted share, in the
prior-years second quarter. Excluding restructuring charges, net income
for the second quarters of fiscal 2018 and 2017 was $0.2 million and
$1.4 million, respectively. On a per diluted share basis excluding
restructuring charges, net income was $0.02 and $0.14 for the second
quarters of fiscal 2018 and 2017, respectively.

James R. Lines, Grahams President and Chief Executive Officer,
commented, "Given the prolonged market downturn and continued
uncertainty, we made the difficult decision during our fiscal second
quarter to lower our operating costs by reducing our global workforce by
an additional 6%. We anticipate an immediate impact from these actions,
with about half of the $1.5 million of annualized cost savings expected
this fiscal year."

He continued, "We remain very diligent in our pursuit of strategic
acquisitions to further strengthen Graham, and we believe that our
strong balance sheet provides us flexibility to pursue that strategy."

Second Quarter Fiscal 2018 Sales Summary

(See accompanying financial tables for a breakdown of sales by
industry and region)

The decline in sales during the fiscal 2018 second quarter compared with
the prior-year quarter was primarily due to a $4.2 million reduction in
sales to the power market to $1.9 million, and a $2.0 million reduction
in sales to the refining market to $4.7 million. These declines were
partially offset by higher sales to the chemical/petrochemical market
and the other commercial, industrial and defense markets, which
increased by $0.6 million and $1.7 million, respectively, compared with
the prior-year quarter.

From a geographic perspective, the second quarters sales decrease can
primarily be attributed to a $4.3 million decline in sales to the U.S.,
to $11.1 million. Sales to international markets increased by $0.4
million, to $6.1 million.

Fluctuations in Grahams sales among geographic locations and
industries can vary measurably from quarter-to-quarter based on the
timing and magnitude of projects. Graham does not believe that
such quarter-to-quarter fluctuations are indicative of business trends,
which it believes are more apparent on a trailing twelve month basis.

Second quarter fiscal 2018 gross profit was negatively impacted by lower
sales. Gross margin was also negatively impacted by a weaker mix of
projects, as well as under-absorption of overhead costs due to lower
sales.

Selling, general and administrative ("SG&A") expenses of $3.7 million
were 16% higher than the prior-year period. SG&A as a percent of sales
was 21% in the second quarter of fiscal 2018 compared with 15% in the
same prior-year period. The increase was primarily due to insurance
proceeds of $0.8 million which benefited the fiscal 2017 second quarter.
Excluding this, SG&A expenses in the current quarter were lower than the
prior-year period by $0.2 million, almost entirely due to lower sales
commissions.

In the second quarter of fiscal 2018, the Company reduced its global
headcount by approximately 6% and incurred a $0.3 million pre-tax
restructuring charge for severance costs. The annual savings from these
reductions are expected to be $1.5 million, half of which is expected to
be realized in the second half of fiscal 2018. Graham also incurred a
$75 thousand pre-tax restructuring charge in the second quarter of
fiscal 2017, reflecting completion of headcount reduction activities
which began in fiscal 2017s first quarter.

To summarize, the decrease in net income during the second quarter
compared with the prior-year quarter was primarily driven by lower
sales, weaker project mix and the impact of the prior-year insurance
proceeds.

Excluding the $0.3 million nonrecurring restructuring charge recorded in
the second quarter of fiscal 2018 ($0.2 million net of tax), adjusted
net income, a non-GAAP number, was $0.2 million or $0.02 per diluted
share.

Adjusted EBITDA (defined as consolidated net income before interest
expense and income, income taxes, depreciation and amortization and a
nonrecurring restructuring charge where applicable) during the fiscal
2018 second quarter was also negatively impacted by the factors
discussed above.

Graham believes that, when used in conjunction with measures prepared in
accordance with GAAP, adjusted net income, Adjusted EBITDA and Adjusted
EBITDA margin (Adjusted EBITDA as a percentage of sales), which are
non-GAAP measures, help in the understanding of its operating
performance. Grahams credit facility also contains ratios based on
EBITDA. See the attached tables for additional important disclosures
regarding Grahams use of adjusted net income, Adjusted EBITDA and
Adjusted EBITDA margin as well as a reconciliation of net income to
Adjusted EBITDA.

International sales were $12.2 million in the first half of fiscal 2018
and represented 32% of total sales, compared with $11.8 million, or 27%
of sales, in the same prior-year period. Sales to the U.S. were $25.9
million, or 68% of first half net sales, in fiscal 2018 compared with
$31.7 million, or 73% of fiscal 2017 first half net sales.

The decrease in gross profit was primarily due to lower volume stemming
from a 12% reduction sales when compared to the same prior-year period,
partially offset by the timing of lower overhead costs.

SG&A in the first half of fiscal 2018 was $7.4 million, up 8% or $0.6
million. As a percent of sales, SG&A was 19% in the first half of fiscal
2018 compared with 16% in the same prior-year period. The increase in
SG&A resulted from the same factors that impacted the quarterly
comparison.

Excluding the $0.3 million nonrecurring restructuring charge recorded in
the first half of fiscal 2018, ($0.2 million net of tax), adjusted net
income, a non-GAAP number, was $1.2 million or $0.12 per diluted share.

Graham believes that, when used in conjunction with measures prepared in
accordance with GAAP, adjusted net income, Adjusted EBITDA and Adjusted
EBITDA margin (Adjusted EBITDA as a percentage of sales), which are
non-GAAP measures, help in the understanding of its operating
performance. Grahams credit facility also contains ratios based on
EBITDA. See the attached tables for additional important disclosures
regarding Grahams use of adjusted net income, Adjusted EBITDA and
Adjusted EBITDA margin as well as a reconciliation of net income to
Adjusted EBITDA.

Capital Readily Available to Pursue Growth Opportunities

Cash, cash equivalents and investments at September 30, 2017 were $72.1
million, down $1.4 million from March 31, 2017. The decrease resulted
primarily from lower operating cash flow.

Cash provided by operations in the first half of fiscal 2018 was $0.8
million, compared with $3.3 million in the first half of fiscal 2017.
The decrease was primarily the result of timing of working capital
utilization and lower net income.

Capital expenditures in the first half of fiscal 2018 were $0.4 million,
compared with $0.2 million in the first half of fiscal 2017. The Company
expects capital expenditures for fiscal 2018 to be between $2.5 million
and $3.0 million. The majority of the Companys capital investments are
expected to be used for productivity enhancements, information
technology upgrades and other items.

Dividend payments were $1.8 million in the first half of fiscal 2018,
compared with $1.7 million in the first half of 2017.

Graham had neither borrowings under its credit facility, nor any
long-term debt outstanding, at September 30, 2017.

Continued Weakness Despite Sequential Increase in Orders

Orders were $17.1 million in the second quarter of fiscal 2018, down 31%
from the prior-years second quarter. However, second quarter orders
were up $6.0 million sequentially from the first quarter of fiscal 2018.
In the fiscal 2018 second quarter, orders from U.S. customers were $14.4
million, or 84% of total orders, and orders from international markets
were $2.7 million, or 16%. This compares with 74% from the U.S. and 26%
from international markets in the second quarter of fiscal 2017.

Graham expects that the balance between domestic and international
orders will continue to be variable between quarters.

Backlog at the end of the second quarter of fiscal 2018 was $73.0
million, relatively flat sequentially from the end of the previous
quarter, but down $9.6 million from the end of fiscal 2017.

The Company believes that its backlog mix by industry continues to
highlight the success of its diversification strategy to increase sales
to the U.S. Navy and the power industry. Backlog by industry at
September 30, 2017 was approximately:

--
69% for U.S. Navy projects

--
15% for refinery projects

--
6% for chemical/petrochemical projects

--
5% for power projects, including nuclear

--
5% for other industrial applications

The expected timing for the Companys backlog to convert to sales is as
follows:

--
Within next 12 months: 50% to 55%

--
Within 12 to 24 months: 5% to 10%

--
Beyond 24 months: 35% to 40%

Revising FY 2018 Guidance

The Company is revising its fiscal 2018 guidance to reflect continued
weakness in its markets:

--
Revenue anticipated to be between $75 and $80 million

--
Gross margin expected to be between 21% and 23%

--
SG&A expense expected to be between $15.0 and $15.5 million

--
Effective tax rate anticipated to be between 28% and 30%

Mr. Lines concluded. "Our order activity has remained weak, driving the
reduction in our revenue guidance for fiscal 2018. Historically we have
been a late cycle business. We are hopeful that we are near the bottom,
as strength currently being experienced by early cycle businesses gives
us encouragement."

Webcast and Conference Call

Grahams management will host a conference call and live webcast today
at 11:00 a.m. Eastern Time to review its financial condition and
operating results for the second quarter fiscal 2018, as well as its
strategy and outlook. The review will be accompanied by a slide
presentation which will be made available immediately prior to the
conference call on Grahams website at www.graham-mfg.com
under the heading "Investor Relations." A question-and-answer session
will follow the formal presentation.

Grahams conference call can be accessed by calling (201) 689-8560.
Alternatively, the webcast can be monitored on Grahams website at www.graham-mfg.com
under the heading "Investor Relations."

A telephonic replay will be available from 2:00 p.m. ET on the day of
the teleconference through Wednesday, November 1, 2017. To listen to the
archived call, dial (412) 317-6671 and enter conference ID number
13671702. A transcript of the call will be placed on Grahams website,
once available.

ABOUT GRAHAM CORPORATION

Graham is a global business that designs, manufactures and sells
critical equipment for the energy, defense and chemical/petrochemical
industries. Energy markets include oil refining, cogeneration, nuclear
and alternative power. For the defense industry, the Companys equipment
is used in nuclear propulsion power systems for the U.S. Navy. Grahams
global brand is built upon world-renowned engineering expertise in
vacuum and heat transfer technology, responsive and flexible service and
unsurpassed quality. Graham designs and manufactures custom-engineered
ejectors, vacuum pumping systems, surface condensers and vacuum systems.
Graham is also a leading nuclear code accredited fabrication and
specialty machining company. Graham supplies components used inside
reactor vessels and outside containment vessels of nuclear power
facilities. Grahams equipment can also be found in other diverse
applications such as metal refining, pulp and paper processing, water
heating, refrigeration, desalination, food processing, pharmaceutical,
heating, ventilating and air conditioning. Grahams reach spans the
globe and its equipment is installed in facilities from North and South
America to Europe, Asia, Africa and the Middle East. Graham routinely
posts news and other important information on its website, www.graham-mfg.com,
where additional comprehensive information on Graham Corporation and its
subsidiaries can be found.

Safe Harbor Regarding Forward Looking Statements

This news release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended.

Forward-looking statements are subject to risks, uncertainties and
assumptions and are identified by words such as "expects," "estimates,"
"confidence," "projects," "typically," "outlook," "anticipates,"
"believes," "appears," "could," "opportunities," "seeking," "plans,"
"aim," "pursuit," and other similar words. All statements addressing
operating performance, events, or developments that Graham Corporation
expects or anticipates will occur in the future, including but not
limited to, expected expansion and growth opportunities within its
domestic and international markets, anticipated revenue, the timing of
conversion of backlog to sales, market presence, profit margins, tax
rates, foreign sales operations, its ability to improve cost
competitiveness, customer preferences, changes in market conditions in
the industries in which it operates, changes in commodities prices, the
effect on its business of volatility in commodities prices, changes in
general economic conditions and customer behavior, forecasts regarding
the timing and scope of the economic recovery in its markets, its
acquisition and growth strategy and the expected performance of Energy
Steel & Supply Co. and its operations in China and other international
locations, are forward-looking statements. Because they are
forward-looking, they should be evaluated in light of important risk
factors and uncertainties. These risk factors and uncertainties are more
fully described in Graham Corporations most recent Annual Report filed
with the Securities and Exchange Commission, included under the heading
entitled "Risk Factors."

Should one or more of these risks or uncertainties materialize, or
should any of Graham Corporations underlying assumptions prove
incorrect, actual results may vary materially from those currently
anticipated. In addition, undue reliance should not be placed on Graham
Corporations forward-looking statements. Except as required by law,
Graham Corporation disclaims any obligation to update or publicly
announce any revisions to any of the forward-looking statements
contained in this news release.

Adjusted net income is defined as GAAP net income excluding a
nonrecurring restructuring charge. Adjusted net income is not a measure
determined in accordance with generally accepted accounting principles
in the United States, commonly known as GAAP. Nevertheless, Graham
believes that providing non-GAAP information such as Adjusted net income
is important for investors and other readers of Grahams financial
statements, as it is used as an analytical indicator by Grahams
management to better understand operating performance. Because Adjusted
net income is a non-GAAP measure and is thus susceptible to varying
calculations, Adjusted net income, as presented, may not be directly
comparable to other similarly titled measures used by other companies.

Adjusted EBITDA is defined as consolidated net income before interest
expense and income, income taxes, depreciation and amortization and a
nonrecurring restructuring charge. Adjusted EBITDA margin is
Adjusted EBITDA divided by sales. Adjusted EBITDA and Adjusted
EBITDA margin are not measures determined in accordance with generally
accepted accounting principles in the United States, commonly known as
GAAP. Nevertheless, Graham believes that providing non-GAAP
information such as Adjusted EBITDA and Adjusted EBITDA margin are
important for investors and other readers of Grahams financial
statements, as they are used as analytical indicators by Grahams
management to better understand operating performance. Grahams
credit facility also contains ratios based on EBITDA. Because
Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures and are
thus susceptible to varying calculations, Adjusted EBITDA and Adjusted
EBITDA margin, as presented, may not be directly comparable to other
similarly titled measures used by other companies.